Yes, you are doing it the right way..

You can redirect all of the pages in the sub-directory to your home page or to the store page on the new site which is probably the best place to point it..

Once the 301 is seen by the search engines they will read it to mean that the page has been permanently moved to the new location so yes, the old pages will be de-indexed over time..

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Steve : Animal Charms Animal Jewelry | Fishing Blog
I'm smelling a whole lot of if coming off of this plan.